Crunch Time for World Trade Deal: Once Again the Developing Countries Have Failed to Convince the Rich Nations to Play Fair in World Trade. the Doha Treaty, Which Would Reduce Poverty in the Developing World While Keeping the Rich Wealthy, Has Been Shuttling Backwards and Forwards with No Agreement in Sight. the Implications of a Stalemate Are Serious

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The Doha Development Agenda--the ninth round of global free trade talks launched in November 2001 by the World Trade Organisation (WTO) in the wake of the 9/11 terrorist outrage--presented what was described as an 'unparalleled opportunity' for all countries to reap benefits from a freer, fairer, multilateral trading system.

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After five long years, the agenda has been exhausted and talks finally reached a stalemate. As India's trade minister Kamal Nath said: "The Doha round is definitely between intensive care and the crematorium." This failure dashes any hopes of making globalisation more inclusive and helping African farmers and manufacturers, particularly by tackling the problems of trade barriers and subsidies in farming, the rich world's most highly-protected industry.

It is a bitter irony that the 'quad' countries (Canada, the EU, Japan and US) spend six times as much on farm subsidies as the total world official development aid budget. Big, wealthy farmers receive a disproportionately large share of government support in the US and EU since payments are based on area of land planted. The larger the area planted, the larger the government's support.

The WTO talks originally set 1 January 2005 as the deadline for an ambitious Doha Treaty, the deadline subsequently revised to end-December 2006. The Doha Treaty was supposed to open up agricultural markets in rich countries and markets for industrial goods and services from prime developing nations (notably Brazil, China, India and South Africa).

The World Bank estimated that a positive outcome to the Doha round (i.e. the extra trade an agreement would generate) would mean gains in real income for all countries of about $100bn by 2015, with one-fifth accruing to developing countries. That would have lifted millions out of poverty.

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Advocates of free trade say a workable deal would fuel world growth and boost jobs, but there was an underlying fear that trade liberalisation would initially cost jobs in developing countries as infant industries became exposed to fierce competition from multinational companies.

Disappointing outcome

Pascal Lamy, WTO director-general, urged the 149 member-countries to 'act decisively and with real urgency' to create a freer and fairer global trading system. However little, if any, tangible progress was achieved on three principal topics on the Doha agenda: slashing 'trade-distorting' tariffs and farm subsidies; moving forward with liberalisation of the trade in manufactures and deregulating service sectors (namely public utilities, financials and telecoms) in big emerging markets.

The December 2005 Hong Kong summit yielded only minimal results. The 'quad' countries agreed to phase out, by 2013, agricultural export subsidies--without a commitment on import tariffs. Empirical research and analysis shows that import tariffs are, in fact, more detrimental to poor nations than farm subsidies. Removal of export subsidies would harm food-importers by raising the price of subsidised products.

Regarding cotton production, the US and EU pledged to abolish export subsidies, but the US refused to set a timetable for reducing payments it made to its own growers. A decade ago, the US spent almost $10bn a year in subsidising its fortunate farmers; today it spends twice that amount. Cotton subsidies raise producer prices by over one-half in the US and even higher in the EU. India's trade minister put it succinctly: "Indian farmers can compete with US farmers but not with the US Treasury." Extensive subsidies allow US growers to export cotton at just one-third of actual production cost.

Finally, the OECD countries offered the 32 least-developed countries (LDCs) quota-free, duty-free market access for 97% of their goods. Yet even this proposal was trimmed as textiles and sugar--where poorer WTO members enjoy a competitive edge thanks to cheaper labour costs--were excluded from the US's commitment, and Japan insisted on blocking rice imports. …